A federal court has preliminarily approved an $11 million class action settlement that would resolve claims that ExxonMobil Corp. subsidiary XTO Energy Inc. wrongly deducted post-production costs from the royalty payments of hundreds of Pennsylvania landowners.
The U.S. District Court for the Western District of Pennsylvania certified a class of 1,142 landowners with royalty interests in roughly 900 leases and 1,095 wells. XTO agreed to pay the $11 million settlement in exchange for the right to continue deducting post-production costs from royalty payments.
A final approval hearing has been scheduled for March 27. Class members have the right to be excluded from the settlement, which would allow them to bring similar claims in the future against the company.
The preliminary approval, granted last week, comes more than two years after a family trust and farm filed the lawsuit, alleging XTO breached leases by deducting the costs to cover the expenses of compression, dehydration and transmission, among other things.
The plaintiffs claimed that their leases, executed by Phillips Production Co. before it was acquired by ExxonMobil, barred post-production deductions and instead provided for royalty payments based on the gross proceeds of gas produced on their property.
XTO, which sought to dismiss the lawsuit but was denied, had argued that the deductions are not a violation of state law. Producers operating in the state have fought similar battles, while legislators have pushed unsuccessfully to enact legislation to better protect landowners from incurring post-production expenses.